eco final project

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CHAPTER 1

INTRODUCTION

This report examines tariff and non-tariff policies restrict trade between countries in

agricultural commodities. Many of these policies are now subject to important disciplines

under the 1994 GATT agreement that is administered by the World Trade Organization

(WTO). The paper is organized as follows. First, tariffs, import quotas, and tariff rate quotas

are discussed. Then, a series of non-tariff barriers to trade are examined, including voluntary

export restraints, technical barriers to trade, domestic content regulations, import licensing,

the operations of import State Trading Enterprises(STEs), and exchange rate management

policies. Finally, the precautionary principle, an environment related rationale for trade, andphytosanitary barriers to trade are discussed.

BACKGROUND

Tariffs and Tariff Rate Quotas

Tariffs, which are taxes on imports of commodities into a country or region, are among the

oldest forms of government intervention in economic activity. They are implemented for two

clear economic purposes. First, they provide revenue for the government. Second, they

improve economic returns to firms and suppliers of resources to domestic industry that face

competition from foreign imports. Tariffs are widely used to protect domestic producers

incomes from foreign competition. This protection comes at an economic cost to domestic

consumers who pay higher prices for import competing goods and to the economy as a whole

through the inefficient allocation of resources to the import competing domestic industry.

Therefore, since1948, when average tariffs on manufactured goods exceeded 30 percent in

most developed economies, those economies have sought to reduce tariffs on manufactured

goods through several rounds of negotiations under the General Agreement on Tariffs Trade

(GATT). Only in the most recent Uruguay Round of negotiations were trade and tariff

restrictions in agriculture addressed. In the past, and even under GATT, tariffs levied on

some agricultural commodities by some countries have been very large. When coupled with

other barriers to trade they have often constituted formidable barriers to market access from

foreign producers. In fact, tariffs that is set high enough can block all trade and act just like

import bans. A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota. Thetypical TRQ will set a low tariff for imports of a fixed quantity and a higher tariff for any


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imports that exceed that initial quantity. In a legal sense and at the WTO, countries are

allowed to combine the use of two tariffs in the form of a TRQ, even when they have agreed

not to use strict import quotas. In the United States, important TRQ schedules are set for beef,

sugar, peanuts, and many dairy products. In each case, the initial tariff rate is quite low, but

the over-quota tariff is prohibitive or close to prohibitive for most normal trade. Explicit

import quotas used to be quite common in agricultural trade. They allowed governments to

strictly limit the amount of imports of a commodity and thus to plan on a particular import

quantity in setting domestic commodity programs. Another common non-tariff barrier (NTB)

was the so-called voluntary export restraint (VER) under which exporting countries would

agree to limit shipments of a commodity to the importing country, although often only under

threat of some even more restrictive or onerous activity. In some cases, exporters were

willing to comply with a VER because they were able to capture economic benefits through

higher prices for their exports in the importing countrys market.

ISSUES

In the Uruguay round of the GATT/WTO negotiations, members agreed to drop the use of

import quotas and other non-tariff barriers in favor of tariff-rate quotas. Countries also agreed

to gradually lower each tariff rate and raise the quantity to which the low tariff applied. Thus,

over time, trade would be taxed at a lower rate and trade flows would increase. Given current

U.S. commitments under the WTO on market access, options are limited for U.S. policy

innovations in the 2002 Farm Bill Vis a Vis tariffs on agricultural imports from other

countries. Providing higher prices to domestic producers by increasing tariff son agricultural

imports is not permitted. In addition, particularly because the U.S. is a net exporter of many

agricultural commodities, successive U.S. governments have generally taken a strong

position within the WTO that tariff and TRQ barriers need to be reduced.

NON-TARIFF TRADE BARRIERS

Countries use many mechanisms to restrict imports. A critical objective of the Uruguay

Round of GATT negotiations, shared by the U.S., was the elimination of non-tariff barriers to

trade in agricultural commodities (including quotas) and, where necessary, to replace them

with tariffs a process called tarrification. Tarrification of agricultural commodities was

largely achieved and viewed as a major success of the 1994 GATT Agreement. Thus, if the

U.S. honors its GATT commitments, the utilization of new non-tariff barriers to trade is notreally an option for the 2002 Farm Bill.


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Domestic Content Requirements

Governments have used domestic content regulations to restrict imports. The intent isusually

to stimulate the development of domestic industries. Domestic contentregulations typically

specify the percentage of a products total value that must be produced domestically in order

for the product to be sold in the domestic market (Carbaugh). Several developing countries

have imposed domestic content requirements tofoster agricultural, automobile, and textile

production. They are normally used in conjunction with a policy of import substitution in

which domestic production replaces imports. Domestic content requirements have not been as

prevalent in agriculture as in some other industries, such as automobiles, but some

agricultural examples illustrate their effects. Australia used domestic content requirements to

support leaf tobacco production.

In order to pay a relatively low import duty on imported tobacco, Australian cigarette

manufacturers were required to use 57 percent domestic leaf tobacco. Member countries of

trade agreements also use domestic content rules to ensure that nonmembers do not

manipulate the agreements to circumvent tariffs. For example, North American Free Trade

Agreement (NAFTA) rules of origin provisions stipulate that all single-strength citrus juice

must be made from 100 percent NAFTA origin fresh citrus fruit

OBJECTIVE OF STUDY

International trade policies deals with the policies of the national govt. relating toexports of various goods and services in various countries either on equal terms &

conditions or on discriminatory terms & conditions.

Trade policies also aim at protecting the domestic industry from the competitionof the advanced countries through imposing quotas & build competencies by

providing subsidies.

INSTRUMENTS OF TRADE POLICY:

Tariff Non-tariff

Tariffs Barriers represent taxes on imports of commodities into a country/region and are

among the oldest form of government intervention in the economic activity.


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Non Tariff Barriers represent the great variety of mechanisms that countries use in order to

restrict the imports. For example:

Technical Barriers To Entry; Import Licensing; Domestic Content Regulations; Voluntary Export Restrains Etc.

The non tariff barriers are mentioned in GATT 1947, art.37 (1/b):

(a) The developed contracting parties shall to the fullest extent possible _ that is, except

when compelling reasons, which may include legal reasons, make it impossible _ give effect

to the following provisions:

(b) refrain from introducing, or increasing the incidence of, customs duties or non-tariff

import barriers on products currently or potentially of particular export interest to less-

developed contracting parties;

BARRIERS

Accessibility to an import market may be hampered by the tariff barriers, and the non-tariff

barriers, of the imporing country. The tarif barriers restraint are to protect the domestic l

manufactures or producers from forign competitin. Exports products generally become less

competitive as aresult of barriers.

High custom dutyThe high import duties in many ountries have been reduced the former GATT ( general

agreement on tariff & trade) multilateral agrements. The GATT was formed in geneva,

switzerland, in 1947 & it was succeeded by the WTO (world trade organization) on january1,1995. Ther organization, thourgh multilateral agreements, helps reduce trade barriers

between the signatory countries & promotes trade thourgh tareiff concessions. WTO has

widw power to regulate international competition.


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Countervaling dutyCounterveling duty is a duty imposed in addition to the regular (general) import duty, in order

to counteract or offset the subsidy & bounty paid to forighn export manufactures by their

government as an incentive to export, that would reduce the cost of goods,.Imposing a

countervailing duty is the answer to unfair competition from subsidized forign goods.

Anti-dumping dutyAnti dumping duty is a duty imposed to offset the advantage gained by the foreign expoters

when they sell their goods to an importing country at a price far lower than their domestic

selling price or below cost. Dumping usually occurs from the oversupply of goods, which is

often a result of overproduction, and from disposing obsolete to other markets.

Customs Duty AssementsCustoms duties are generally assessed in three ways: ad valorem duty, specific duty and

compound duty.

Ad Valorem duty: Ad valorem means according to value. Duty is aasessed aspercentage of the import value of goods (e.g. 30% of FOB price)

Specify duty : Specify duty is assessed on the basis of some units of measurements,such as quantity (e.g.$5 per dozen) or weight, either net weight or gross weight (e.g.

$20 per kilogram net).

Compound DutyCompound duty is assessed as a combination of the specific duty and ad valoren duty ($20

per kilogram net, plus 30% of FOB price).


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Tariff are often created to protect infant indutries and developing economices, but are also

used by more advanced economices with developed industries. Here are five top resons

tariffa are:

1.POTECTING DOMESTIC EMPOLOYMENT

The levying of tariffs is often highly politiczed. The possibility of increased compotition from

imported goods can threaten domestic industries. These domestic componies may fire

workers or shift production abroad cut costs, which means higher unemployment and less

happy electorate. The unemployment argument often shifts to domestic industries

complaning about chep forigh labour, and how poor working conditions and lack ofregulation allow foreign companies to produce goods more cheply. In economices, however,

countries will continue to produce goods until they no longer have a comparative advantage (

non to be confused with an advantages).

2. PROTECTING CONSUMERS

A goerment levy a tariff or products it feels could endanger its population. For example, soth

korea may place a tariff on imported beet from the united states if its thinks that the goods

can be tainted with diseases.

3.INFANT INDUSTRIES

The use of tariffs to protect infant industries can be seen by the Import Substitution

Industrialization (ISI) strategy employed by many developing nations. The government of a

developing economy will levy tariffs on imported goods in industries in which it wants to

foster growth. This increases the prices of imported goods and creates a domestic market for

domestically produced goods, while protecting those industries from being forced out by

more competitive pricing. It decreases unemployment and allows developing countries to

shift from agriculture. Criticisms of this sort ofprotectionist strategy revolve around the cost

ofsubsidizing the development of infant industries. If an industry develops without
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competition, it could wind up producing lower quality goods, and the subsidies required to

keep the state-backed industry.

4. NATIONAL SECURITY

Barriers are also employed by developed countries to protect certain industries that are

deemed strategically important, such as those supporting national security. Defense industries

are often viewed as vital to state interests, and often enjoy significant levels of protection. For

example, while both Western Europe and the United States are industrialized, both are very

protective of defense-oriented.

5. RETALIATION

Countries may also set tariffs as a retaliation technique if they think that a trading partner has

not played by the rules. For example, if France believes that the United States has allowed its

wine producers to call its domestically produced sparkling wines "Champagne" (a name

specific to the Champagne region of France) for too long, it may levy a tariff on imported

meat from the United States. If the U.S. agrees to crack down on the improper labeling,

France is likely to stop its retaliation. Retaliation can also be employed if a trading partner

goes against the government's foreign policy objectives.
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CHAPTER 2

TARIFF BARRIERS

TARIFF BARRIERS:

Meaning:

Refers to the tax imposed on the goods when they enter or leave the national frontier or

boundary.

Definition:

(Economics) A Barrier To Trade Between Certain Countries Or Geographical Areas Which

Takes The Form Of Abnormally High Taxes Levied By A Government On Imports Or

Occasionally Exports For Purposes Of Protection, Support Of The Balance Of Payments, Or

The Raising Of Revenue.

Tariffs are the most common kind of barrier to trade; indeed, one of the purposes of the WTO

is to enable Member countries to negotiate mutual tariff reductions. Before we consider the

legal framework that provides the discipline regarding tariffs, we must understand the

definition of tariffs, their functions, and their component elements (rates, classifications, and

valuations).

Tariff barriers are duties imposed on goods which effectively create an obstacle to trade,

although this is not necessarily the purpose of putting tariffs in place. Tariff barriers are also

sometimes known as import restraints, because they limit the amount of goods which can be

imported into a country. Many organizations which promote trade are concerned about both

tariff and non-tariff barriers to free trade, and a number of nations have agreed to radically

reduce their trade barriers to promote the exchange of goods across their borders.

A number of different types of duties can be levied when goods cross international

boundaries. With an ad valorem duty, for example, the importer must pay a fee which is

calculated as a percentage of the value of the goods being imported. Specific tariffs are set

amounts which are levied on products which are imported, regardless of values, while

environmental tariffs penalize nations with poor environmental records.


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For importers, tariff barriers can make it difficult to bring goods into a country. The importer

may be forced to import less because the tariff barriers cannot be afforded otherwise, and it

may need to charge more for the goods to make importing worthwhile. Tariffs are designed to

force importers to do this to level the field between domestic producers and importers,

allowing costly domestic producers to compete with importers who may be able to bring in

goods at lower cost.

IMPACTS OF TARIFF BARRIERS:

Tariff barriers tend to increase: Inflationary pressures Special interest privileges. Government control & political considerations in economic matters.

Tariff barriers tend to weaken: Balance of payments positions. Supply & demand patterns. International relations (they can start trade wars)

Tariff barriers tend to restrict: Manufacture supply sources Choices available to consumers. Competition.

IMPACT OF TARIFF ON TRAFFIC

Call minutes are highly elastic against price, this means that the demand for call minutes

varies greatly according to price. A slight decrease in price leads to a great increase in callminutes. The higher the price, the more this effect is noticeable, for both business and

residential customers on international or local calls. This means that it is often the case that

more revenue is achievable at lower prices, that is, E < -1.

Internet traffic research show that the traffic intensity is directly affected by the tariffs

charged in connecting customers to theirInternet Service Provider(ISP). For example,

a circuit-switched networkprovider charges different tariffs at different times of the day. It

was noted that at the time that the rates decreased, the traffic intensity logged by the ISP

increased dramatically and then decayed over time at an exponential rate. The conclusion of
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the research was that by varying prices over time, a telecommunications service provider can

reduce the level of the traffic intensity at peak periods, resulting in lower equipment costs

because of the reduced need to provision to meet peak demand, which in turn leads to

increases in long-term revenue and profitability.

TYPES OF TARIFFS:

On the basis of purpose:

Revenue Tariff:

To provide state with revenue. Levied on luxury goods.

Protective Tariff:

To maintain & encourage those branches of home industry protected by the duties.

TYPES OF TARIFFS AND TRADE BARRIERS

There are several types of tariffs and barriers that a government can employ:

Specific tariffs Ad valorem tariffs Licenses Import quotas Voluntary export restraints Local content requirements

SPECIFIC TARIFFS

A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff

canvary according to the type of good imported. For example, a country could levy a $15

tariff on each pair of shoes imported, but levy a $300 tariff on each computer imported.

AD VALOREM TARIFFS
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The phrase AD VALOREM is Latin for "according to value", and this type of tariff is levied

on a good based on a percentage of that good's value. An example of an ad valorem tariff

would be a15% tariff levied by Japan on U.S. automobiles. The 15% is a price increase on the

value of the automobile, so a $10,000 vehicle now costs $11,500 to Japanese consumers. This

price increase protects domestic producers from being undercut, but also keeps prices

artificially high for the Japanese car shoppers.

Non-Tariff Barriers To Trade Include

LICENSES

A license is granted to a business by the government, and allows the business to import a

certain type of good into the country. For example, there could be a restriction on imported

cheese, and licenses would be granted to certain companies allowing them to act as importers.

This creates a restriction on competition, and increases prices faced by consumers.

IMPORT QUOTAS

Import quotas a restriction placed on the amount of a particular good that can be imported.

This sort of barrier is often associated with the issuance of licenses. For example, a country

may place a quota on the volume of imported citrus fruit that is allowed.

VOLUNTARY EXPORT RESTRAINTS (VER)

This type of trade barrier is "voluntary" in that it is created by the exporting country rather

than the importing one. A voluntary export restraint is usually levied at the behest of the

importing country, and could be accompanied by a reciprocal VER. For example, Brazil

could place a VER on the exportation of sugar to Canada, based on a request by Canada.

Canada could then place a VER on the exportation of coal to Brazil. This increases the price

of both coal and sugar, but protects the domestic industries.

LOCAL CONTENT REQUIREMENT

Instead of placing a quota on the number of goods that can be imported, the government can

require that a certain percentage of a good be made domestically. The restriction can be a

percentage of the good itself, or a percentage of the value of the good. For example, arestriction on the import of computers might say that 25% of the pieces used to make the
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computer are made domestically, or can say that 15% of the value of the good must come

from domestically produced components.

FUNCTIONS OF TARIFFS

Tariffs have three primary functions: to serve as a source of revenue, to protect domestic

industries, and to remedy trade distortions (punitive function).

The revenue function comes from the fact that the income from tariffs provides governments

with a source of funding. In the past, the revenue function was indeed one of the major

reasons for applying tariffs, but economic development and the creation of systematic

domestic tax codes have reduced its importance in the developed countries. For example,

Japan generates about 90 billion yen in tariff revenue, but this is only 1.7 percent of total tax

revenues (fiscal 1996). In some developing countries, however, revenue may still be an

Tariffs is also a policy tool to protect domestic industries by changing the conditions under

which goods compete in such a way that competitive imports are placed at a disadvantage. In

point of fact, a cursory examination of the tariff rates employed by different countries does

seem to indicate that they reflect, to a considerable extent, the competitiveness of domestic

industries. In some cases, tariff quotas are used to strike a balance between market accessand the protection of domestic industry. Tariff quotas work by assigning low or no duties to

imports up to a certain volume (primary duties) and then higher rates (secondary duties) to

any imports that exceed that level.

The WTO bans in principle the use of quantitative restrictions as a means of protecting

domestic industries, but does allow tariffs to be used for this purpose.3 The cost of protecting

domestic industry comes in the form of a general reduction in the protecting country's

economic welfare and in the welfare of the world economy at large, but tariffs are still

considered to be more desirable than quantitative restrictions.

Punitive tariffs may be used to remedy trade distortions resulting from measures adopted by

other countries. For example, the Antidumping Agreement allows countries to use

"antidumping-duties" to remedy proven cases of injurious dumping; similarly, the Subsidies

Agreement allows countries to impose countervailing duties when an exporting country

provides its manufacturers with subsidies that, while not specifically banned, nonetheless

damage the domestic industry of an importing country.


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Purpose: To Protect The Domestic Industry By Increasing The Cost Of Imported Goods.

Example: GoI imposed tariffs to protect domestic automobile industry, sugar industry,

cement industry & steel industry.

NON TARIFF BARRIERS

Non-Tariff measures include all measures, other than tariffs, the effect of which is to restrict

imports, or to significantly distort trade.

Tariff raise prices & limit trade sometime the govt. alter the prices of products to limit their

product import & export.( Direct price influence)-Susidies help companies be competitive

when to overcome the market imperfections are least controversial.Aid and aLoans to other

countries & the recipient is required to spend the fund in the donor country known as tied

aids and tied loans. (Quantity Controls)- Quota means setting the total amount to be traded or

allocate amount by its country. Voluntaru Export Restraint(VER)-when a voluntary choice by

a particular country to constrain its shipment to another country to protect the political

relations. Embargoes-A specific tyoe of quota the prohibits all forms of trade (fixed the limit

at zero) regardless of origin or destinations. Buy local legislation-Govt. give preference to

domestically made goods or specify a domestic content resrictions.Standard & labels-

Arbitrary standard, licesing arrangements, administarative delays, reciprocal requirement

service resrictions

TYPES OF NON-TARIFF BARRIERS:

Specific limitation and trade:

Quotas Imports licensing requirements. Proportion restrictions of foreign to domestic goods (local content requirement)

Custom and administrative entry procedure:

Valuation system. Antidumping practice. Documentation requirement. Fees.

Government participation in trade:


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Government procurement policies. Exports subsidies. Countervailing duties. Domestic assistant programs.

Charges on imports:

Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discriminations Border taxes.

IMPACT OF NON-TARIFF BARRIERS:

Have emerged as potent protectionist tool It being less transparent, its difficult to identify & quantify its impact.

NonTariff Barriers and Exports: An Impact Analysis from AfricaEU and Africa

USA Trade Relations"

There have been divergent opinions as to what undermine Africas export flows to the

developed nations particularly the European Union (EU) and United State of America (USA).

While tariff barriers had been said to be a major hindrance to Africas exports according to

African governments, studies have found that tariffs which are part of instruments of trade

restrictions (ITRs) were not the only problems to Africas export flows. However, most of

these studies examined only the tax (price)related trade restrictions without considering the

non tariff barriers. Besides, conclusions of these studies were based on data that were

limited to subSaharan Africa (SSA). These gaps were filled by this study by providing an

econometrics analysis of trade restriction issues and also determine the most significant trade

restriction instruments that inhibit Africas export to these markets. Thus, this study evaluates

the impact of non tariff barriers in the EU and USA on Africas exports with the view of

examining the extent to which its determined market access.

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CHAPTER 3

NON TARIFF BARRIERS

TARIFFS AND MODERN TRADE

The role tariffs play in international trade has declined in modern times. One of the primary

reasons for the decline is the introduction of international organizations designed to improve

free trade, such as the World Trade Organization (WTO). Such organizations make it more

difficult for a country to levy tariffs and taxes on imported goods, and can reduce the

likelihood of retaliatory taxes. Because of this, countries have shifted to non-tariff barriers,

such as quotas and export restraints. Organizations like the WTO attempt to reduce

production and consumption distortions created by tariffs. These distortions are the result ofdomestic producers making goods due to inflated prices, and consumers purchasing fewer

goods because prices have increased. (To learn about the WTO's efforts, read

What Is The World Trade Organization?

Since the 1930s, many developed countries have reduced tariffs and trade barriers, which has

improved global integration and brought about globalization. Multilateral agreements

between governments increase the likelihood of tariff reduction, while enforcement on

binding agreements reduces uncertainty.

NON-TARIFF BARRIERS TO TRADE

(NTBs) are trade barriers that restrict importsbut are not in the usual form of a tariff. Some

common examples of NTB's are anti-dumping measures and countervailing duties, which,

although they are called "non-tariff" barriers, have the effect of tariffs once they are enacted.

Their use has risen sharply after the WTO rules led to a very significant reduction in tariff

use. Some non-tariff trade barriers are expressly permitted in very limited circumstances,

when they are deemed necessary to protect health, safety, or sanitation, or to protect

delectable natural resources. In other forms, they are criticized as a means to evade free trade

rules such as those of the World Trade Organization(WTO), the European Union(EU), or

North American Free Trade Agreement(NAFTA) that restrict the use of tariffs.

Some of non-tariff barriers are not directly related to foreign economic regulations, but

nevertheless they have a significant impact on foreign-economic activity and foreign trade
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between countries. Trade between countries is referred to trade in goods, services and factors

of production. Non-tariff barriers to trade include import quotas, special licenses,

unreasonable standards for the quality of goods, bureaucratic delays at customs, export

restrictions, limiting the activities of state trading, export subsidies, countervailing duties,

technical barriers to trade, sanitary and phi to-sanitary measures, rules of origin,

etc. Sometimes in this list they include macroeconomic measures affecting trade.

Six Types Of Non-Tariff Barriers To Trade1. QUOTAS

ImportLicensingrequirements Proportion restrictions of foreign to domestic goods (local content requirements) Minimum import price limits

2.EMBARGOES

Customs and Administrative Entry Procedures: Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees

3. STANDARDS

Standard disparities Intergovernmental acceptances of testing methods and standards Packaging, labeling, and marking

4. GOVERNMENT PARTICIPATION IN TRADE

Government procurement policies Export subsidies

Countervailing duties Domestic assistance programs
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5. CHARGES ON IMPORTS

Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discriminations Variable levies Border taxes

6. OTHERS:

Voluntary export restraints Orderly marketing agreements

Examples Of Non-Tariff Barriers To Trade On-Tariff Barriers To Trade Can Be:

Import bans

General or product-specific quotas

Rules of Origin

Quality conditions imposed by the importing country on the exporting countries

Sanitary and phy to-sanitary conditions

Packaging conditions

Labeling conditions

Product standards

Complex regulatory environment

Determination of eligibility of an exporting country by the importing country

Determination of eligibility of an exporting establishment (firm, company) by the

importing country.Additional trade documents like Certificate of Origin, Certificate of Authenticity etc.

health regulation

Employment law

Import licenses

State subsidies procurement, trading, state

Export subsidies

Fixation of a minimum import price

Product classification
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Quota shares

market controls and multiplicity

Inadequate infrastructure

"Buy national" policy

Over-valued currency

property laws patents, copyrights

Restrictive licenses

Seasonal import regimes

Corrupt and/or lengthy customs procedures

TYPES OF NON- TARIFF BARRIERS

There are several different variants of division of non-tariff barriers. Some scholars divide

between internal taxes, administrative barriers, health and sanitary regulations and

government procurement policies. Others divide non-tariff barriers into more categories such

as specific limitations on trade, customs and administrative entry procedures, standards,

government participation in trade, charges on import, and other categories. We choose

traditional classification of non-tariff barriers, according to which they are divided into 3

principal categories.

The first category includes methods to directly import restrictions for protection of certain

sectors of national industries: licensing and allocation of import quotas, antidumping and

Countervailing duties, import deposits, so-called voluntary export restraints, countervailing

duties, the system of minimum import prices, etc. Under second category follow methods that

are not directly aimed at restricting foreign trade and more related to the administrative

bureaucracy, whose actions, however, restrict trade, for example: customs procedures,

Technical standards and norms, sanitary and veterinary standards, requirements for labeling

and packaging, bottling, etc. The third category consists of methods that are not directly

aimed at restricting the import or promoting the export, but the effects of which often lead to

this result.

The non-tariff barriers can include wide variety of restrictions to trade. Here are some

Example of the popular NTBs.
http://en.wikipedia.org/wiki/Quota_sharehttp://en.wikipedia.org/wiki/Quota_share


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Licenses

The most common instruments of direct regulation of imports (and sometimes export) are

licenses and quotas. Almost all industrialized countries apply these non-tariff methods. The

license system requires that a state (through specially authorized office) issues permits for

foreign trade transactions of import and export commodities included in the lists of licensed

merchandises. Product licensing can take many forms and procedures. The main types of

licenses are general license that permits unrestricted importation or exportation of goods

included in theists for a certain period of time; and one-time license for a certain product

importer (exporter) to import (or export). One-time license indicates a quantity of goods, its

cost, its country of origin (or destination), and in some cases also customs point through

which import (or export) of goods should be carried out. The use of licensing systems as an

instrument for foreign trade regulation is based on a number of international level standards

agreements. In particular, these agreements include some provisions of the General

Agreement on Tariffs and Trade and the Agreement on Import Licensing Procedures,

concluded under the GATT (GATT).

Quotas

Licensing of foreign trade is closely related to quantitative restrictions quotas on imports

and exports of certain goods. A quota is a limitation in value or in physical terms, imposed on

import and export of certain goods for a certain period of time. This category includes global

quotas in respect to specific countries, seasonal quotas, and so-called "voluntary" export

restraints. Quantitative controls on foreign trade transactions carried out through one-time

license.

Quantitative restriction on imports and exports is a direct administrative form of government

regulation of foreign trade. Licenses and quotas limit the independence of enterprises With a

regard to entering foreign markets, narrowing the range of countries, which may be entered

into transaction for certain commodities, regulate the number and range of goods permitted

for import and export. However, the system of licensing and quota imports and exports,

establishing firm control over foreign trade in certain goods, in many cases turns out to be

more flexible and effective than economic instruments of foreign trade regulation. This can

be explained by the fact, that licensing and quota systems are an important instrument of

trade regulation of the vast majority of the world.


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Agreement On A "Voluntary" Export Restraint

In the past decade, a widespread practice of concluding agreements on the "voluntaryexport restrictions and the establishment of import minimum prices imposed by

leading Western nations upon weaker in economical or political sense exporters. The

specifics of these types of restrictions is the establishment of unconventional

techniques when the trade barriers of importing country, are introduced at the border

of the exporting and not importing country. Thus, the agreement on "voluntary"

export restraints is imposed on the exporter under the threat of sanctions to limit the

export of certain goods in the importing country. Similarly, the establishment of

minimum import prices should be strictly observed by the exporting firms in contracts

with the importers of the country that has set such prices. In the case of reduction

of export prices below the minimum level, the importing country imposes anti-

dumping duty which could lead to with Drawl from the market. Voluntary" export

agreements affect trade in textiles, Footwear, dairy products, consumer electronics,

cars, machine tools, etc.

Problems arise when the quotas are distributed between countries, because it isnecessary to ensure that products from one country are not diverted in violation ofquotas set ou tin second country. Import quotas are not necessarily designed to protect

domestic producers. For example, Japan, maintains quotas on many agricultural

products it does not produce. Quotas on imports is a leverage when negotiating the

sales of Japanese exports, as well as avoiding excessive dependence on any other

country in respect of necessary food, supplies of which may decrease in case of bad

weather or political conditions.

Export quotas can be set in order to provide domestic consumers with sufficientstocks of goods at low prices, to prevent the depletion of natural resources, as well as

to increase export prices by restricting supply to foreign markets. Such restrictions

(through agreements on various types of goods) allow producing countries to use

quotas for such commodities as coffee and oil; as the result, prices for these products

increased in importing countries.


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EMBARGO

Embargo is a specific type of quotas prohibiting the trade. As well as quotas, embargoes may

be imposed on imports or exports of particular goods, regardless of destination, in respect

of certain goods supplied to specific countries, or in respect of all goods shipped to certain

countries. Although the embargo is usually introduced for political purposes, the

consequences, in essence, could be economic.

STANDARDS

Standards take a special place among non-tariff barriers. Countries usually impose standards

on classification, labeling and testing of products in order to be able to sell domestic

products, but also to block sales of products of foreign manufacture. These standards aresometimes entered under the pretext of protecting the safety and health of local populations.

Administrative and bureaucratic delays at the entrance

Among the methods of non-tariff regulation should be mentioned administrative andbureaucratic delays at the entrance which increase uncertainty and the cost of

maintaining inventory.

Import Deposits

Another example of foreign trade regulations is import deposits. Import deposits is aform of deposit, which the importer must pay the bank for a definite period of time

(non-interest-bearing deposit) in an amount equal to all or part of the cost of imported

goods.

At the national level, administrative regulation of capital movements is carried outmainly within a framework of bilateral agreements, which include a clear definition of

the legal regime, the procedure for the admission of investments and investors. It is

determined by mode (fair and equitable, national, most-favored-nation), order of

nationalization and compensation, transfer profits and capital repatriation and dispute

resolution.


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Foreign Exchange Restrictions And Foreign Exchange Controls

Foreign exchange restrictions and foreign exchange controls occupy a special placeamong the non-tariff regulatory instruments of foreign economic activity. Foreign

exchange restrictions constitute the regulation of transactions of residents and

nonresidents with currency And other currency values. Also an important part of the

mechanism of control of foreign economic activity is the establishment of the national

currency against foreign currencies.

The Transition From Tariffs To Non-Tariff Barriers

One of the reasons why industrialized countries have moved from tariffs to NTBs isthe fact that developed countries have sources of income other than tariffs.

Historically, in the formation of nation-states, governments had to get funding. They

received it through the introduction of tariffs. This explains the fact that most

developing countries still rely on tariffs as a way to finance their spending. Developed

countries can afford not to depend on tariffs, at the same time developing NTBs as a

possible way of international trade regulation. The second reason for the transition to

NTBs is that these tariffs can be used to support weak industries or compensation of

industries, which have been affected negatively by the reduction of tariffs. The thirdreason for the popularity of NTBs is the ability of interest groups to influence the

process in the absence of opportunities to obtain government support for the tariffs.

NON-TARIFF MEASURES

Non-tariff measures (NTMs) are of particular concern to exporters and importers indeveloping countries, as they are a major impediment to international trade and can prevent

market access. Exporting companies seeking access to foreign markets and companies

importing products need to comply with a wide range of requirements including technical

regulations, product standards and customs procedures.

The business sector, particularly in developing countries, often lacks the information,

capabilities and facilities needed. Meeting the complex requirements and demonstrating

compliance with NTMs can also come at a considerable cost.


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o UNDERSTANDING NTMSo NTM OFFICIAL DATAo NTM BUSINESS SURVEYo PROCEDURAL OBSTACLESo PUBLICATIONSo NEWS & EVENTS

Similarly, national policymakers often lack a clear understanding of what their businesssector perceives as predominant obstacles to trade, which can make it difficult to develop

appropriate trade-related policies. At the same time, while there is an on-going global effort

to increase economic liberalization that seek to eliminate or reduce tariffs, during the past

decade there has also been a steady increase in the number of non-tariff measures.

UNDERSTANDING NON-TARIFF MEASURES NTMs can be broadly defined as policy measures, other than ordinary custom tariffs, that

may have an economic effect on international trade in goods. They may also affect the price

of traded goods or in the quantity of trade goods, or both. Although the use of NTMs is in

many cases legitimate - for example to ensure quality or protect consumers' health - they are

also sometimes used as protectionist measures. It is usually difficult to clearly determine if
http://www.intracen.org/policy/non-tariff-measures/understanding-ntms/http://www.intracen.org/policy/non-tariff-measures/understanding-ntms/http://www.intracen.org/policy/non-tariff-measures/ntm-official-data/http://www.intracen.org/policy/non-tariff-measures/ntm-official-data/http://www.intracen.org/policy/non-tariff-measures/ntm-business-survey/http://www.intracen.org/policy/non-tariff-measures/ntm-business-survey/http://www.intracen.org/policy/non-tariff-measures/procedural-obstacles/http://www.intracen.org/policy/non-tariff-measures/procedural-obstacles/http://www.intracen.org/policy/non-tariff-measures/ntm-publications/http://www.intracen.org/policy/non-tariff-measures/ntm-publications/http://www.intracen.org/policy/non-tariff-measures/events-and-media-coverage/http://www.intracen.org/policy/non-tariff-measures/events-and-media-coverage/http://www.intracen.org/policy/non-tariff-measures/events-and-media-coverage/http://www.intracen.org/policy/non-tariff-measures/ntm-publications/http://www.intracen.org/policy/non-tariff-measures/procedural-obstacles/http://www.intracen.org/policy/non-tariff-measures/ntm-business-survey/http://www.intracen.org/policy/non-tariff-measures/ntm-official-data/http://www.intracen.org/policy/non-tariff-measures/understanding-ntms/


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the purpose of the regulation is for legitimate or protectionist reasons.

ITCS PROGRAMME ON NON-TARIFF MEASURES The International Trade Centre's (ITC) programmed on NTMs aims at increasing

transparency and help countries better understand obstacles to trade faced by the business

community. In close collaboration with national and regional stakeholders, ITC is engaged in

a multi-agency initiative that assists countries in finding solutions tailored to meet their

specific needs.

The programme consists of two main activities:1. Official NTM data: One part of the project is focused on the collection of official

regulation related to export or import of goods. These regulations are uniformly

classified according to measure types using the international NTM nomenclature that

was developed under a multi-agency framework, including ITC, and led by the United

Nations Conference on Trade and Development (UNCTAD). Since the data is

collected from published official sources it is often very reliable. ITC creates a central

depository for all the collected data and disseminates this through its ITCs Market

Access Tool.

2. NTM Business Survey: The second part of the programmed aims to complement theofficial data collected by identifying measures that exporters and importers perceive

problematic and why. For this purpose ITC conducts large-scale company-level

surveys to identify regulations that are too strict to comply with and regulations

whose compliance is difficult because of related procedural obstacles. ITC

collaborates closely with ministries, export promotion agencies, research institutes,

business associations and local experts in each country.
http://www.intracen.org/exporters/non-tariff-measures/ntm-official-data/http://www.macmap.org/http://www.macmap.org/http://www.macmap.org/http://www.macmap.org/http://www.intracen.org/exporters/non-tariff-measures/ntm-business-survey/http://www.intracen.org/exporters/non-tariff-measures/ntm-business-survey/http://www.macmap.org/http://www.macmap.org/http://www.intracen.org/exporters/non-tariff-measures/ntm-official-data/


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NON-TARIFF BARRIERS TODAY

With the exception of export subsidies and quotas, NTBs are most similar to thetariffs. Tariffs for goods production were reduced during the eight rounds of

negotiations in the Wotan the General Agreement on Tariffs and Trade (GATT). After

lowering of tariffs, the principle of protectionism demanded the introduction of new

NTBs such as technical barriers to trade (TBT). According to statements made at

United Nations Conference on Trade and Development(UNCTAD, 2005), the use of

NTBs, based on the amount and control of price levels has decreased significantly

from 45% in 1994 to 15% in 2004, while use of other NTBs increased from 55% in

1994 to 85% in 2004.

Increasing consumer demand for safe and environment friendly products also havehad their impact on increasing popularity of TBT. Many NTBs are governed by WTO

agreements, which originated in the Uruguay Round (the TBT Agreement, SPS

Measures Agreement, the Agreement on Textiles and Clothing), as well as GATT

articles. NTBs in the field of services have become as important as in the field of

usual trade.

Most of the NTB can be defined as protectionist measures, unless they are related todifficulties in the market, such as externalities and information asymmetries

information asymmetries between consumers and producers of goods. An example of

this is safety standards and labeling requirements.

The need to protect sensitive to import industries, as well as a wide range of traderestrictions, available to the governments of industrialized countries, forcing them to

resort to use the NTB, and putting serious obstacles to international trade and world

economic growth.

Thus, NTBs can be referred as a new of protection which has replaced tariffs as an old

form of Protection.


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Tariff Barriers v/s Non Tariff Barriers

All countries are dependent on other countries for some products and services as no country

can ever hope to be self reliant in all respects. There are countries having abundance of

natural resources like minerals and oil but are deficient in having technology to process them

into finished goods. Then there are countries that are facing shortage of manpower and

services. All such shortcomings can be overcome through international trade. Though it

seems easy, in reality, importing goods from foreign countries at cheap prices hits domestic

producers badly. As such, countries impose taxes on goods coming from abroad to make their

cost comparable with domestic goods. These are called tariff barriers. Then there are non

tariff barriers also that serve as impediments in free international trade. This article will try to

find out differences between tariff and non tariff barriers.

Tariff Barriers

Tariffs are taxes that are put in place not only to protect infant industries at home, but also to

prevent unemployment because of shut down of domestic industries. This leads to unrest

among the masses and an unhappy electorate which is not a favorable thing for any

government. Secondly, tariffs provide a source of revenue to the government though

consumers are denied their right to enjoy goods at a cheaper price. There are specific tariffs

that are a onetime tax levied on goods. This is different for goods in different categories.

There are Ad Valorem tariffs that are a ploy to keep imported goods pricier. This is done to

protect domestic producers of similar products.

Non Tariff Barriers

Placing tariff barriers are not enough to protect domestic industries, countries resort to non

tariff barriers that prevent foreign goods from coming inside the country. One of these non

tariff barriers is the creation of licenses. Companies are granted licenses so that they can

import goods and services. But enough restrictions are imposed on new entrants so that there

is less competition and very few companies actually are able to import goods in certain

categories. This keeps the amount of goods imported under check and thus protects domestic

producers.


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Import Quotas is another trick used by countries to place a barrier to the entry of foreign

goods in certain categories. This allows a government to set a limit on the amount of goods

imported in a particular category. As soon as this limit is crossed, no importer can import

further quantities of the goods. Non tariff barriers are sometimes retaliatory in nature as when

a country is antagonistic to a particular country and does not wish to allow goods from that

country to be imported. There are instances where restrictions are placed on flimsy grounds

such as when western countries cite reasons of human rights or child labor on goods imported

from third world countries. They also place barriers to trade citing environmental reasons.

Tarff for are import for several reasons though basically it may sound the protection for

domestic industry is the main reason. Traffic provide protection domestic industry and

basically it is expected that during the initial stages only the protection should be provided in

order to protected the domestic industry form the international competitive product and

therefore economic forget in front the industry forgive for traffic due to traffic the

redistribution of income between consumers and producers texts place it is called as

redistribution of income between consumers and producers texts place it is called as

redistribution of transfer effects because money gets transferred from one group of consumers

to another group of producers the government collects revenue due to tariff or custom duties

the revenue collected by the government equals the traffic multiplied by the volume of

imports a traffic produces consumption effects because it reduces total consumption of

commodities due to the price rise generally a traffic causes increase in rice of the protected

commodity assuming that a price in the exporting country rise by the full amount of the tariff

sometimes in the imposing g country remains the same which face entire burden is on the

exposing country due to tariff generally imported commodities available in the domestic

economy and therefore rational consumer prefers to off for domestic commodity than the

imported one therefore import the bill becomes lesser which helps to bring down deficit in

the balance of payments due to the imposing of tariff as a policy matter sometimes country

has to face the effects and therefore terms on trends suffer imposing

tariff as a policy on the basis of in front industry arrangement allows protection through tariff

only during the initial stages therefore efficiency of the production induces ultimately leads to

production of qualitative goods. At the competitive price due to tarrif the revenue is collected

and generated out of which different the works are undertaken where employment

opportunity are created & incomes are generated.


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Tariffs Duty

While shipping goods internationally, the government directly charges a duty on a goods for

crossing its national boundary for protection and revenue on a per unit or a value system is

known as tariffs. Tariffs collected by the exporting country are called export tariffs. Levied

by a country through which the gods have passed called transit tariffs. Collected by the

importing countries are called import tariffs.

Revised Cases:

Domestic industries & consumer suffer (job/industry). Promotional of inefficiencies,(infant

industry), creating hardship/poverty in a nation (debatable),could provoke retaliation & trade

war.

Solution does not lie retaliatory action but in establishment of Rules & regulation for

international trade which result MINIMAL TRADE DISTORTING activities.


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CHAPTER 4

CONCLUSION

Governmental interference is often argued to be beneficial if it promotes industrialization.

Different trade control instruments are used to improve the economic relations with other

countries. A countrys development of an international strategy greatly depend on trade

controls that directly affect price and indirectly affect quantity (traffic, subsidies, arbitrary

customs valuation methods & special fees) and directly affect quantity and indirectly affect

price ( quotas VER , buy local, arbitrary standards, licensing arrangements, foreign exchange

controls & administrative delays)

While tariffs having been already brought down substantially in the Uruguay Round, thefuture efforts are more likely to concentrate on the non-tariff issues.

It is not true that the non-tariff measures are entirely unnecessary. The WTO Agreements

permit the Members to take measures to protect human, animal or plant life or health, to

conserve natural resources or to ensure the quality of goods finding an access in their

markets. Members can also in certain circumstances take specified action to protect their

domestic industry. The non-tariff measures act as barriers if they are applied as protectionist

measures in a disguise. The non-tariff measures need, therefore, to be examined for their

consistency with the WTO disciplines and whether they are applied as a protectionist

measures in a disguised form or manner.

If a country feels that non-tariff measures taken against its exports are inconsistent with the

WTO provisions, it may take the matter to the WTO dispute settlement mechanism, besides

seeking bilateral consultations. WTO provisions, however, do not cover all areas and,

therefore, some difficulties may be experienced where WTO provisions do not exist. Even

where the measures are consistent with the WTO provisions, most of the agreements envisage

special and preferential treatment for the developing country members. Bilateral

consultations can perhaps hell a lot in this regard.


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BIBLIOGRAPHY

WEBSITES

www.asiatrade .com www.google.com www.mecklai.com www.wipro.com http://en.wikipedia.org http://en.wikipedia.org/wiki/ETrace

BOOKS

1. Non-Tariff Barriers affecting Indian exports- Raj Mehta

NEWS PARERS

The Economic Times Business Line
http://www.google.com/http://www.google.com/http://www.mecklai.com/http://www.mecklai.com/http://www.wipro.com/http://www.wipro.com/http://en.wikipedia.org/http://en.wikipedia.org/http://en.wikipedia.org/wiki/ETracehttp://en.wikipedia.org/wiki/ETracehttp://en.wikipedia.org/wiki/ETracehttp://en.wikipedia.org/http://www.wipro.com/http://www.mecklai.com/http://www.google.com/http://www.wikipedia.org/

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